what are the disadvantages and advantages of excess insurance?

Question

excess as in, u have to make a claim over say 500 before they will pay it out

Answer 1

Excess such as umbrella's or Excess such as excess and surplus lines? I will guess you mean umbrella's.
Advantages: 1) Covers liability over and above your underlying limits of general liability. (Greater coverage) 2) It is very cost effective and is one of the cheapest coverages to buy.

Disadvantages: 1) Very seldom does it ever come in to play, and when it does it usually has a high retention limit of $10,000.00 (like a deductible).

My opinion it is a coverage that I consider to be a luxury, but in catastrophic situations, you would be glad you have it....

Answer 2

It really depends on what you're trying to do.

Property insurance is one thing. In most cases, insurance companies will not let you get "excess" insurance to any significant degree. If your house costs $200,000, you'll be hard-pressed to find a company that will be willing to insure it for $500,000, and you certainly won't find anyone willing to pay out $500,000 should your $200,000 home burn down.

Liability insurance is a little different. Here, you are basically insuring against your potential need to make restitution for harm you cause. But you are only capable of paying as much as you have assets. So if you're worth $1 million, there isn't much sense in getting an insurance policy for $10 million. There isn't any way you can be held liable for much more than you're worth. So again, you're paying for protection against a nonexistent threat. Insurance companies will usually write a liability policy at whatever level you want, though they generally have pre-established levels from which you must choose ($1 million, $2 million, $5 million, that kind of thing). But as no court will generally fine you more than you're capable of scraping together, there isn't much point here either.

The basic premise of insurance is returning the insured to the material and financial state they were in before the loss occured. Insurance companies are not in the business of enriching their insureds when a loss is suffered, they will simply restore them to their previous position. As such, insurance companies are very reluctant to insure you for more than they think you or your property is worth.

Answer 3

Disadvantages: You pay more premium. They will find ways not to pay you. They will assume that you are conning them for taking excessive insurance.

For property insurance, they do not pay more that what the property is worth. Insure your 100K house for 1 million. they will only pay you 100K when your claim is settled. Yet they have no hesitation to take your premium payment for insuring it for 1 million.